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125 OBS (Nominees1) & Anor v Lend Lease Construction (Europe) Ltd & Anor
Factual and Procedural Background
125 Old Broad Street ("the Property") is a prestigious office building in the City of London, redeveloped between 2006 and 2008 under a design and build contract between the Claimants and the Defendants (collectively "Lend Lease"). The redevelopment included installation of a curtain walling system with toughened glass outer panes, intended to provide a 30-year service life.
Between 2008 and 2012, 17 spontaneous failures of glass panes occurred on the building due to nickel sulphide (NiS) inclusions, with some panes shattering and falling to street level, causing public safety concerns and extensive scaffolding for protection. Subsequently, the decision was made to replace the outer glass skin, completed in 2013. Further failures occurred in stored glass panes removed from the building, totaling 21+ breakages.
The Claimants brought this action seeking damages for defective glass and costs of re-cladding. The Defendants contended that their sole contractual obligation was to heat soak the glass in accordance with the relevant European Standard (EN 14179, 2005 Standard) with a 4-hour holding period, which they asserted had been complied with, and that the Claimants had accepted the residual risk of NiS failures.
The court found the Claimants succeeded on liability, awarding damages of £14,753,195.16, with interest to be calculated.
Legal Issues Presented
- Whether the Defendants were contractually obliged to provide glass with a 30-year service and design life in addition to the obligation to heat soak in accordance with the 2005 Standard.
- Whether the Defendants complied with the heat soak testing requirements of the contract.
- Whether the residual risk of NiS breakage under the 2005 Standard (with extended holding time) was consistent with the number of breakages experienced.
- Whether the Claimants had accepted or assumed the risk of NiS induced breakages beyond the Defects Liability Period.
- The reasonableness of the Claimants' decision to undertake wholesale reglazing rather than installing a canopy.
- The recoverability and reasonableness of the Claimants' claimed costs, including remedial works, third party claims, storage, and finance charges.
- Whether the finance charges and associated losses were too remote.
Arguments of the Parties
The opinion contains detailed accounts of the parties' positions but does not present them as discrete bullet-pointed arguments suitable for summary. Therefore:
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Arnold v Britton [2015] UKSC 36 | Principles of contractual interpretation, focusing on the meaning of words in context and commercial common sense. | The court applied Arnold to interpret multiple contractual provisions relating to the Defendants' obligations, concluding that several discrete obligations existed in addition to heat soaking. |
| Prenn v Simmonds [1971] 1 WLR 1381 | Foundational principles of contract interpretation referenced in Arnold. | Used as part of the interpretative framework. |
| Rainy Sky SA v Kookmin Bank [2011] UKSC 50 | Principles on resolving ambiguity in contracts in favor of commercial common sense. | Supported the court's approach to interpreting contractual obligations consistently. |
| Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 | Principles governing contract construction and interpretation. | Referenced as part of the interpretative principles applied. |
| MT Hojgaard A/S v E.ON Climate and Renewables UK Robin Rigg East Ltd [2015] EWCA Civ 407 | Whether contract imposes a double obligation to comply with standards and achieve a specified result. | The court distinguished this case but drew on its reasoning in assessing whether heat soak obligations excluded other obligations. |
| Siemens Building Technology FE Ltd v Supershield Ltd [2009] EWHC 927 (TCC) | Principles on reasonableness of settlements of third party claims and recoverability of associated losses. | Adopted to assess reasonableness and recoverability of third party settlements paid by the Claimants. |
| Hadley v Baxendale (1854) 156 E.R. 145 | Principles on remoteness of damages in contract law. | Applied to determine recoverability of finance charges and related losses. |
| Victoria Laundry (Windsor) Limited v Newman Industries Limited [1949] 2 KB 528 | Remoteness and foreseeability of damages. | Applied alongside Hadley v Baxendale. |
| Koufos v C. Czarnikow Limited ("The Heron II") [1969] 1 AC 350 | Foreseeability and remoteness of loss. | Referenced in remoteness analysis. |
| Transfield Shipping Inc v Mercator Shipping Inc ("The Achilleas") [2008] UKHL 48 | Assumption of responsibility and remoteness of damages. | Considered but found not to exclude liability for finance-related losses in this case. |
| Mander v Commercial Union Assurance [1998] Lloyds Rep IR 93 | Burden of proof regarding reasonableness of settlements. | Referenced in assessing third party settlements. |
| BP plc v AON [2006] EWHC 424 (Comm) | Reasonableness test for settlements and recoverable losses. | Referenced in third party claims analysis. |
Court's Reasoning and Analysis
The court undertook a detailed factual and expert evidence analysis, focusing heavily on the properties and risks associated with toughened glass and NiS inclusions. It accepted expert evidence that properly heat soaked glass in accordance with the 2005 Standard (with a 4-hour holding phase) should have a residual risk of NiS breakage of no more than 1 breakage per 400 tonnes on a statistical basis for very large quantities.
Applying this to the approximately 300 tonnes of glass used at the Property, the court found it reasonable to expect either no breakages or one breakage, with the possibility of up to five or six being extremely unlikely. The reality of 21+ breakages was therefore significantly outside the anticipated range.
The court found that the documentation provided by the Defendants' supply chain was unreliable and fabricated in part, and compelling evidence (notably from independent monitoring records) showed that approximately 35-40% of the glass was not heat soaked at all, constituting a serious breach of contract.
Contractual interpretation principles were applied to determine that the Defendants had multiple discrete obligations, including to provide materials of good quality, appropriate for their purpose, and with a 30-year service and design life, in addition to the obligation to heat soak the glass. The court rejected the Defendants' contention that the obligation to heat soak was the sole effective obligation and that the Claimants had accepted the risk of breakages at the level experienced.
The court also considered the reasonableness of the Claimants' decision to reglaze rather than rely on a canopy, concluding the reglazing was reasonable and necessary given the scale and nature of the failures and public safety risks.
Regarding quantum, the court assessed various categories of losses, including remedial works, third party claims, storage costs, and finance charges, applying established principles on causation, remoteness, and reasonableness of settlements. It found the claimed losses recoverable except for one item relating to a rent holiday where insufficient evidence was provided to quantify loss.
Interest on damages was to be calculated separately.
Holding and Implications
The court held that:
- The Defendants breached the contract by failing to heat soak a substantial proportion of the glass in accordance with the 2005 Standard as amended by the contract, resulting in an excessive number of NiS-induced breakages.
- The contract imposed multiple discrete obligations on the Defendants beyond the heat soak requirement, including providing glass with a 30-year service and design life, of good quality and appropriate for its purpose.
- The Claimants did not accept or assume the risk of NiS breakages at the scale that occurred.
- The Claimants' decision to reglaze the building was reasonable and necessary.
- The Claimants are entitled to recover damages totaling £14,753,195.16 for losses arising from the breach, including costs of remedial works, third party claims, storage, and finance charges, subject to interest and minor adjustments.
The implications are that the Defendants are liable for the substantial losses caused by their failure to comply with contractual obligations. The decision reinforces the principle that obligations to meet performance and quality standards in construction contracts are not displaced merely by compliance with certain technical standards (such as heat soak testing), especially where residual risks are contractually limited. The ruling also underscores the importance of reliable documentation and traceability in construction supply chains.
No new legal precedent was established; rather, the decision applies established principles of contract interpretation, expert evidence evaluation, and damages assessment in a complex construction defect context.
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